DODLA DAIRY LIMITED : A Milk product company of south India A value pick at CMP Rs 495

 

Face Value : Rs 10

Current Market cap :2949 crores

ROE :15.74

ROCE:19.1%

Promoters :62.21%

Sector : Dairy(FMCG)

About Company : : Founded in 1995, Dodla Dairy Limited is an integrated dairy company based in South India. Processes and sells milk and produces dairy-based value-added products viz. Curd, ice-cream, butter, Ghee, Paneer, Youghurt, cheese, Paturised pouch milk, UHT Milk. Currently, Dodla procurement is centered in 5 states(Telangana,AP,Karnatka,TN and products are available for purchase in 13 states. Total 15 milk processing plants in India &Uganda, It has 113 milk chilling centers,1300 plus milk product distributors,2700+ distribution agents,555 Dodla retail parlours. selling value added products.

               

Dodla Dairy got listed on bourses after successful IPO in June 2021 (at IPO price of 428).Later in 20222 it acquired Sri Kisna Milk (P) Ltd,

 

Financials :

 

Rational Investment:

1.       3^RD Largest player in south India in terms of  milk procurement.

2.       The Company enjoys a debt free status and is steadily expanding its capabilities and capacities which is reflected in the growth of Non-current assets from FY19- FY22.Dodla Dairy is investing heavily in expanding its range of value-added products, a move that is anticipated to boost margins. It has invested significantly in value-added products such as Curd, Ice Creams, Flavored Milk, Lassi, Butter Milk, Yoghurt to name a few.

3.       The rapid economic growth and urbanization have resulted in a fundamental shift in consumer preferences and food preferences

4.        Consumer desire for branded, healthier, and more nutritional alternatives is growing

5.        Rising disposable incomes driving demand for value added dairy products

6.       Global presence Uganda + Kenya.

7.       Topline growth at CAGR 14% over last 10 years.

8.       Recovery &Improvement in EBIDTA margins in Q2 vs Q1(22-23)

 Market cap almost = year sale(2023E)

Target Price: FY 21-22 Revenue 2243 Crs EPS 22.24,H1FY-222-23 achieved 1412crs resulting in 31% YOY growth. FY-22-23 Estimated revenue 2900Cr ,expected EPS 24-24.5 Management is targeting 15% CAGR  for next 3 years  going forward the earnings and profitability is expected to grow proportionality ,with expansion in margin with increase in VAP ,next 3 years EPS could grow proportionately to ,28,32,37. At CMP of Rs 495 stock is available at forward PE of 20 which is low and attractive for FMCG company. .Going forward PE expansion and rising EPS could take this stock at much higher levels in next 3 years. At next year expected EPS of 28 & at a forward PE OF 25 stock has potential to touch Rs 700 in 1 year.

Recommended to accumulate(SIP) only for Long term investors on all dips with target price of Rs700